Steuerklasse 4-4 vs. 3-5

12 posts in this topic

Hello Toytowners,

 

I started working in Munich mid-August 2017. I was told by a German colleague that choosing class 3 (higher earning spouse's salary) and 5 (lower salary) instead of 4-4 for both -- only means you will own to the state at the end of the year. Namely, choosing 4-4 is better because "what you get is what is yours".

 

Is that correct? On this website (https://www.brutto-netto-rechner.info/) I noticed class 4 is basically equal to class 1. Why is that so?

 

Is there a threshold to cross in salary difference in order for 3-5 to be a better choice instead of 4-4?

 

Thanks!

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8 minutes ago, java10 said:

On this website (https://www.brutto-netto-rechner.info/) I noticed class 4 is basically equal to class 1. Why is that so?

 

Yes, tax class 4 means that you are taxed as if you were unmarried.

As long as both of you don't earn exactly the same, you will end up paying too much income tax in the tax combo 4/4.

 

Some people prefer to stay in 4/4 because that's the only tax class combo where you don't have to do a tax return every year.

The reasoning why they don't make you do a tax return in 4/4 is that they know full well that if you did do one, they would have to reimburse you tax - they simply rely on people's dislike of filling in the tax return forms.

 

9 minutes ago, java10 said:

I started working in Munich mid-August 2017. I was told by a German colleague that choosing class 3 (higher earning spouse's salary) and 5 (lower salary) instead of 4-4 for both -- only means you will own to the state at the end of the year.

 

Not necessarily.

If the spouse in tax class 5 doesn't earn at all, then you do not own the state anything at all.

 

The higher the lower-earning spouse's income is, the more you will owe at the end of the year, after you have done your mandatory tax return.

Which is why they introduced the "in-between" tax class combination "class 4 with a factor", which is probably what the below calculator will have as a result for you.

 

12 minutes ago, java10 said:

Is there a threshold to cross in salary difference in order for 3-5 to be a better choice instead of 4-4?

 

Please see here for a calculator which tells you which tax class combination is best for your family, i.e. which tax class combination approximates your final tax burden best, so that you won't owe anything at the end of the year after your tax return has been processed: https://www.steuern.de/steuerklassenrechner.html

 

For example, if you have yearly gross of 60,000€ and your spouse of 30,000€, the "best" combination is tax class 4 with factor 0.954, since that would mean only paying 5€ extra after your mandatory tax return has been processed:

5a7868fb76415_Screenshot2018-02-05at15.2

 

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Hey guys, I need help selecting Tax class. I earn 60,000 base salary with 4k bonus and my wife earns 55k with 5K bonus plus she gets stocks. Should I be in class 3 and she in class 5 or both of us in class 4? 

 

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2 hours ago, kum said:

Hey guys, I need help selecting Tax class. I earn 60,000 base salary with 4k bonus and my wife earns 55k with 5K bonus plus she gets stocks. Should I be in class 3 and she in class 5 or both of us in class 4? 

 

 

Tax classes only determine how much tax is pre-collected when both of you receive salary. The 3-5 combination is better if you care about the net salary amount and don't care about the possibility that you might be obliged to pay any difference on the total tax due to the Finanzamt at the end of the year.

 

If you, however, don't mind how much net you get every month (in which case the tax prepayment roughly corresponds to the exact tax amount due per month), then I would suggest 4-4, because in this case you also wouldn't be obliged to make the yearly tax return.

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2 hours ago, kum said:

Hey guys, I need help selecting Tax class. I earn 60,000 base salary with 4k bonus and my wife earns 55k with 5K bonus plus she gets stocks. Should I be in class 3 and she in class 5 or both of us in class 4? 

 

 

4/4

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Thank you guys.

2 hours ago, java10 said:

 

Tax classes only determine how much tax is pre-collected when both of you receive salary. The 3-5 combination is better if you care about the net salary amount and don't care about the possibility that you might be obliged to pay any difference on the total tax due to the Finanzamt at the end of the year.

 

If you, however, don't mind how much net you get every month (in which case the tax prepayment roughly corresponds to the exact tax amount due per month), then I would suggest 4-4, because in this case you also wouldn't be obliged to make the yearly tax return.

 

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Just to add to this topic in the Corona-virus times: Tax class also affects how much money you get in case of short time working (Kurzarbeitergeld) about €400/month between tax class 4 and 3.

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On 28.3.2020, 15:43:17, Brin said:

Just to add to this topic in the Corona-virus times: Tax class also affects how much money you get in case of short time working (Kurzarbeitergeld) about €400/month between tax class 4 and 3.

 

That matters during the year. At the time of submitting Tax Return, you owe to the Finanzamt what you owe them. In case of "better" tax class, more money was being left in one's pocket during the year (most likely more than it should have) - that simply means one will then have to pay those differences.

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11 hours ago, java10 said:

 

That matters during the year. At the time of submitting Tax Return, you owe to the Finanzamt what you owe them. In case of "better" tax class, more money was being left in one's pocket during the year (most likely more than it should have) - that simply means one will then have to pay those differences.

 

No, in this case it is not about taxes themselves and tax return.   The Kurzarbeit is calculated based on the nett income, so it will be lower for the person in the class V and higher for the person in the class III.

 

It is a similar situation to Elterngeld, in former some time people changed the tax class as soon as they knew they were pregnant in order to maximize the Elterngeld, in order to stop this they introduced a rule that the nett is calculated based on the average from long before they were pregnant.

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1 hour ago, Krieg said:

It is a similar situation to Elterngeld, in former some time people changed the tax class as soon as they knew they were pregnant in order to maximize the Elterngeld, in order to stop this they introduced a rule that the nett is calculated based on the average from long before they were pregnant.

 

Which really sucks if you have a temporary unemployment, or are "between jobs". My wife had a 5 year contract run out, and was unemployed* for 7ish months. We moved in the meantime so I could take a better job, and she had to find work in new place, while we also planned to make our Jr. which eventually happened. Her pay before and eventually after unemployment period were both nice, but because of the averaged income rule -- and naturally unemployment payments don't count -- her Elterngeld works out to be nearly the base minimum. Doing the math, it works out to a difference of several hundred euros. Oh well. At least her new employer was pretty cool with her when she told them during her second week that she was already a few months pregnant, lol.

 

* She also did a couple once-off freelance gigs while unemployed, but since "too much" income is clawed back if you're officially unemployed, she ended up keeping almost none of it, and none of that counted towards Elterngeld either. She could have just as well not done them, from a financial POV.

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So, basically it only makes sense to choose the III - V Klass if your partner does not work?! 

 

It's unbelievable the amount of the monthly net income the partner on the V Klass ends getting, and if some contributions payed depends on that monthly amount, it's nonsensical to opt for this option...

 

Am I missing something?!

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On 31.3.2020, 09:05:39, Krieg said:

 

No, in this case it is not about taxes themselves and tax return.   The Kurzarbeit is calculated based on the nett income, so it will be lower for the person in the class V and higher for the person in the class III.

 

It is a similar situation to Elterngeld, in former some time people changed the tax class as soon as they knew they were pregnant in order to maximize the Elterngeld, in order to stop this they introduced a rule that the nett is calculated based on the average from long before they were pregnant.

 

It is not just Kurzarbeit, it applies to other payments like sick pay from the Krankenkasse or unemployment benefit. Payments are usually based on the netto sum of the last six months. As it is usually women who have tax class 5, they should really consider the implications  if they should become ill or unemployed.  

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